ARÇELİK A.Ş. — Interim / Quarterly Report 2016

Jul 29, 2016

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Arçelik

2016 H1 Financial Results

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2016 H1 Key Results

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• Above market-average growth in major product categories in domestic market

• Ongoing organic growth in international markets, accompanied by market share gain and price

index increase

• Increasing gross and EBITDA margin thanks to positive trend in €:$ parity and raw material prices,

and improvement in product mix sold

• Improved and sustained performance in working capital due to ongoing structural measures in receivables and inventory management

• Lower net leverage due to improvement in working capital and proceeds from sales of KFS shares

• Strong cash position composed of hard currency

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2016 H1 Market Performance - Turkey

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Market
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• Growth in MDA and air conditioner markets

  - Despite the slowdown in second quarter, 6% increase in sell-in unit sales in MDA6

  - With the acceleration in Q2, an increase of 18% in sell-in unit sales for A/C

• Shrinking TV market (around 10%) due to issues with import brands and non-traditional

  • retail channel

• MDA and A/C figures are based on BESD data. The data for TV is based on retail panel.

• Above market-average growth in all major product groups

  • All time monthly-sales record in June 2016 both for Arcelik and Beko sales teams

Arçelik A.Ş.

• Around 5% unit growth in shrinking TV market (highest market share within the last 5Y)

• Around 50% increase in unit sales for A/C, especially due to the performance in June

• High sales performance in POS cash register sales (2015 1H: ~%100)

• Based on company sell-in unit sales.

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2016 H1 Market Performance - International

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• Overall positive performance in European MDA markets

• Growth in all major markets in West Europe

Market

• Improving demand in Russian market (2016 H1: %5 growth)

• Around 30% unit growth in Romania

• Weak market in Ukraine with limited recovery

• Decreasing demand in S. Africa in line with macroeconomic conditions (2016 H1: %7 down)

• Arçelik Group continuing to strenghten its position in international markets

• Beko keeping runner-up position in European total MDA market, and ranking

Arçelik A.Ş.

• number 1 in free-standing segment

• Expansion of Grundig MDA range into new markets and channels

• Strong local brands (Arctic & Defy) that continue to reinforce their undisputed leading

• positions in home markets

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2016 H1 Market Figures

Beko Unit Market Share in Europe (%) (MDA 6)

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10
9
8
7
6
5
4
3
2
1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
1H
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Turkish MDA6 Total Market – Monthly Figures (MDA 6)

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mn units
0.9 20%
0.8 17%
0.7 15%
0.6 11%
10%
0.5 9%
0.4 5% 5%
0.3 3%
0.2 0%
0.1 -2%
0.0 -5%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
14 15 16 YoY (RHS)
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Market Unit Growth in Europe (MDA 6)

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January-June 2016
Romania
UK
France
Russia
Germany
Poland
Spain
Italy
Ukraine
-10,0% -5,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0%
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Turkish Market by Product Group (MDA6)

in 000's	6M16	6M15	YoY
Refrigerator	945	885	7%
Freezer	287	244	18%
Washing mach.	1,022	977	5%
Dryer	38	32	17%
Dishwashers	769	695	11%
Ovens	439	455	-3%
Total	3,500	3,288	6%

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2016 H1 Sales Performance

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Key factors impacting revenues

Domestic Market International Growth

Double-digit growth in major product categories, very strong sales performance in POS cash registers and air conditioners

Continuing market share gains in growing European MDA market, increasing sales contribution from China and sales growth in TV market in France due to HD* transition

FX Gains from International Sales

(No impact was seen in 2015 H1.)

• Transition to DVB-T2 MPEG4 to access to more HD broadcasting

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2016 H1 Margins

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Key factors impacting margins

Raw Material Prices

€:USD Parity

Sales & Marketing Expenses

Other Income

Both raw material and panel prices had a positive impact on MDA and TV margins in Q1 and Q2.

Slight appreciation of € against $ in 2016Q2 has supported profit margins. (2016Q2: 1,13 - 2015Q2: 1,11)

Investments to support our long-term branded sales in international markets have partly off-set the improvement in margins.

Increasing contribution from Turquality programme and proceeds from sales of KFS shares have positively affected profit margins.

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Trends in Parity and Raw Material Index

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EUR/USD Development Raw material Market Price Index
1,5 105
100
1,4
95
1,3
90
1,2 85
80
1,1
75
1,0
70
0,9 65
0,8 60
Annual Avg. EUR/USD Annual average RM price index (market)
Raw material price index for appliances category
8
13 Q1 13 Q2 13 Q3 13 Q4 14 Q1 14 Q2 14 Q3 14 Q4 15 Q1 15 Q2 15 Q3 15 Q4 16 Q1 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16
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2016 Q2 Other Developments: Brexit

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• UK has a share of around 10% within our consolidated sales

• In the first half of the year, Arcelik Group has increased both its market share and price index in the

UK market which grew by 10% in unit terms.

• None of our peers have production in the UK and therefore will be impacted by the currency

movement.

• We have risk mitigation plans for various currency and demand scenarios and are closely monitoring the consumer demand and peer action in the market.

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2016 Q2 Other Developments: Dawlance

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• On June 30, 2016, we have signed an SPA to acquire Dawlance, Pakistan’s leading home

appliance company, for USD 258m. (EV: 6.4X EBITDA)

• The company has three production facilities,2 in Karachi and 1 in Hyderabad and is market leader in cooling and microwave ovens (around 45% unit market share) and among the top players in laundry and A/C segments.

• With 16 sales offices, 181 after sales service centers and around 2.000 dealers, the company has an extensive distribution and service network within the country.

• In 2015, the company reported a total revenue of $221m and an EBITDA of $45m.

• Closing is subject to satisfactions of CPs and regulatory approvals from Competition Board in

Pakistan and Ministry of Internal Affairs and is expected to be finalized by 31/12/2016.

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2016 Q2 Other Developments:

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• Arcelik launched HomeWhiz integrated platform, the first of its kind in Turkey, that enables remote control of home appliances through smart phones, tablets or smart TVs.

• Keeping its leading position in Turkish Patent League, Arçelik has retained its title for Number 1 in .

• Turkey in terms of international patent applications

• On April 12-17, Arçelik participated Eurocucina, the world-renowned, prestigious kitchen and

furniture fair in Milano, with its Grundig built-in range .

• Arçelik A.Ş. has been named Turkey’s third ‘Most Popular Company’ in general and the first in durable goods industry.*

• A survey of senior executives conducted by monthly economy magazine Capital

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Sales Performance

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Sales by Region

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TL mn	2016 Q2 2015 Q2 2016 Q1 Δ% YoY Δ% QoQ 2016 H1 2015 H1 Δ% YoY 2015 2014 Δ% YoY 3,960 3,355 3,527 18 12 7,487 6,222 20 14,166 12,514 13 1,724 1,471 1,456 17 18 3,180 2,649 20 5,724 4,850 18 2,236 1,884 2,071 19 8 4,307 3,572 21 8,442 7,664 10
Total Revenue
Turkey International

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43.9% 43.5%
29.8% 29.9%
12.1%
11.6%
8.5%
6.5%
2.8% 3.6% 3.4% 4.4%
Turkey Western CIS&Eastern Africa Middle East Other
Europe Europe
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2015 Q2 2016 Q2

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42.5%
42.6%
31.2%
31.4%
11.4% 11.8%
8.1%
6.5% 3.2% 4.5%
3.3% 3.5%
Turkey Western CIS&Eastern Africa Middle East Other
Europe Europe
2015 H1 2016 H1
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Sales Bridge

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360
TL mn 531
374
4,307
3,572 Impact on Rev
International
Turkey
3,180
2,649
2015 H1 Organic Int. Organic TR FX Impact 2016 H1
2016 H1 Organic FX Impact Total
% International Growth 10.5% 10.1% 20.6%
% Consolidated Growth 14.5% 5.8% 20.3%
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Financial Performance

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Income Statement

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				Δ%	Δ%			Δ%			Δ%
TL mn	2016 Q2	2015 Q2	2016 Q1	YoY	QoQ	2016 H1	2015 H1	YoY	2015	2014	YoY
Revenue	3,960	3,355	3,527	18	12	7,487	6,222	20	14,166	12,514	13
Gross Profit	1,353	1,082	1,194	25	13	2,547	1,953	30	4,536	3,979	14
margin	34.2	32.2	33.9			34.0	31.4		32.0	31.8
EBIT *	331	277	323	20	2	654	457	43	1,157	1,024	13
margin	8.4	8.2	9.2			8.7	7.3		8.2	8.2
Profit Before Tax	656	180	154	264	324	810	302	169	785	732	7
margin	16.6	5.4	4.4			10.8	4.8		5.5	5.8
Net Income**	653	326	157	100	317	810	468	73	893	638	40
margin	16.5	9.7	4.4			10.8	7.5		6.3	5.1
EBITDA*	441	370	421	19	5	862	639	35	1,527	1,370	11
margin	11.1	11.0	11.9			11.5	10.3		10.8	11.0

• EBIT was calculated by deducting the impact of foreign exchange gains and losses arising from trade receivables and payables, credit finance income and charges and cash discount expense and adding income and expenses from sale of property plant and equipment.

** Net income before minority

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Revenue and Gross Profit by Segment

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				Δ%	Δ%			Δ%			Δ%
TL mn	**2016 Q2 **	**2015 Q2 **	2016 Q1	YoY	QoQ	2016 H1	2015 H1	YoY	2015	2014	YoY
Consolidated
Revenue	3,960	3,355	3,527	18	12	7,487	6,222	20	14,166	12,514	13
Gross Profit	1,353	1,082	1,194	25	13	2,547	1,953	30	4,536	3,979	14
Gross Profit %	34.2	32.2	33.9			34.0	31.4		32.0	31.8
White Goods
Revenue	2,747	2,406	2,463	14	12	5,210	4,437	17	10,299	9,069	14
Gross Profit	1,070	846	889	27	20	1,959	1,517	29	3,578	3,080	16
Gross Profit %	38.9	35.1	36.1			37.6	34.2		34.7	34.0
Consumer Electronics
Revenue	529	422	576	25	-8	1,105	852	30	1,966	1,829	7
Gross Profit	119	84	171	42	-30	291	176	66	433	442	-2
Gross Profit %	22.6	19.9	29.8			26.3	20.6		22.0	24.2
Other
Revenue	684	527	489	30	40	1,173	933	26	1,901	1,616	18
Gross Profit	163	152	133	8	23	297	261	14	524	457	15
Gross Profit %	23.9	28.9	27.3			25.3	28.0		27.6	28.3

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Balance Sheet

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TL mn	30.06.2016	31.12.2015		30.06.2016	31.12.2015
Current Assets	10,117	9,406	Current Liabilities	5,540	5,236
Cash and Cash Equivalents	2,467	2,168	ST Bank Borrowings	2,078	1,036
Trade Receivables	5,027	4,791	Trade Payables	2,406	2,090
Inventories	2,311	2,140	Provisions	378	335
Other	312	308	Other	677	1,776
Non-current Assets	3,958	4,332	Non-current Liabilities	3,653	3,826
Property, Plant and Equipment	2,131	2,056	LT Bank Borrowings	3,078	3,269
Financial Investments	211	749	Other	576	557
Other	1,616	1,528	Equity	4,882	4,676
Total Assets	14,076	13,739	Total Liabilities	14,076	13,739

	30.06.2016	31.12.2015	31.12.2014	31.12.2013
Net Financial Debt/Equity	0.55	0.70	0.72	0.72
Total Liabilities/Total Assets	0.65	0.66	0.65	0.64

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Working Capital

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TL mn	FX Basis	TL Basis	30.06.2016		FX Basis	TL Basis	Total
ST Trade Rec.	1,744	3,283	5,027	ST Trade Payables	954	1,452	2,406
Other Receivables	40	58	98	Other Payables	163	195	358
Inventory	1,055	1,256	2,311	Working Capital	1,722	2,950	4,672

TL mn	FX Basis	TL Basis	31.03.2016		FX Basis	TL Basis	Total
ST Trade Rec.	1,680	2,811	4,491	ST Trade Payables	911	1,047	1,958
Other Receivables	39	48	87	Other Payables	161	125	286
Inventory	1,084	1,171	2,255	Working Capital	1,731	2,858	4,588

Working Capital / Sales

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41.8%
33.3% 38.9% 39.2% 39.1% 38.7% 36.2% 37.2% 39.3%
40%
32.5%
30.9%
30.3%
30%
20%
10%
0%
Dec-12 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
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Debt Profile

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3,000 TL mn
2,000
1,000 416
905 1,317 1,174 1,741 1,267 1,621 2,168 2,491 2,467
0
-839
-1,000 -1,915 -1,924 -1,629 -2,144 -1,673 -1,803 -2,185 -2,508 -2,078
-1,218
-2,000
-1,528
-3,000 -1,577 -188 -1,859 -2,581
-2,965
-3,078
-4,000 -3,269 -3,084
-5,000
-6,000
2008 2009 2010 2011 2012 2013 2014 2015 16 Q1 16 Q2
Cash and cash equivalent Short term debt Long term debt
3,076
3,500 2,988 [3,146] [3,286] [3,100] 6
3,000 2,689 5
2,500 2,263
1,983 4
2,000
3
1,500 1,207
5.1 2.6 2
1,000 740 2.3 2.2 2.3 2.2
1.8
500 1.5 1
1.3
0.9
0 0
2008 2009 2010 2011 2012 2013 2014 2015 16Q1 16Q2
Net Debt (TL mn) Net Debt/EBITDA
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Debt	profile (as of 30 Jun 2016)
	Effective Interest Rate p.a. (%)	mn Original **Currency **	TL mn Equivalent
TRY	11.9%	1,819	1,819
EUR 1.6% ZAR 9.7% RUB 8.9% CNY 4.4% GBP 1.3% USD 1.4% Other Total Bank Borrowings		157 750 475 110 5 1	502 145 21 48 18 3 0 2,555
USD	5.1%	503	1,455
EUR 4.0% Total Eurobond		358	1,146 2,601
Total			5,156
	Debt maturity profile
	2016 36% 2017 11% 2018-19 3% 2021 22% 2023 28%

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Cash Flow

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TL mn	2016 H1	2015 H1
Beginning Balance	2,166	1,621
Net Operational Cash Flow	766	266
CapEx	-289	-222
Acquisition of minority interest	0	-282
Fixed Asset Sales	4	10
Financial Asset Sales	559	0
Dividend Paid	-262	-350
Dividends Received	13	24
Changes in Bank Borrowings	-324	34
Other Financial & Investing Activites	-185	-145
Differences due to FX Conversion	18	96
Changes in Cash	300	-568
Ending Balance	2,466	1,052

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2016 Expectations

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2016 Expectations

White goods market volume growth

Turkey* : 3% - 5% International : c.2%

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Stable or higher market share Market Share in key regions Revenue Growth >13% in TL EBITDA Margin (2016) c.11% Long Term EBITDA margin**** c.11%

• 6 main products, in compliance with WGMA data.

**EBITDA margin calculations are inline with the methodology used in calculation of historical values

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www.arcelikas.com

Contacts for Investor Relations

Polat Şen Hande Sarıdal CFO Finance Director Tel: (+90 212) 314 34 34 Tel: (+90 212) 314 31 85

Orkun İnanbil Investor Relations Manager Tel: (+90 212) 314 31 14

investorrelations@arcelik.com

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Disclaimer

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This presentation contains information and analysis on financial statements as well as forward-looking statements that reflect the Company management’s current views with respect to certain future events. Although it is believed that the information and analysis are correct and expectations reflected in these statements are reasonable, they may be affected by a variety of variables and changes in underlying assumptions that could cause actual results to differ materially.

Neither Arçelik nor any of its managers or employees nor any other person shall have any liability whatsoever for any loss arising from the use of this presentation .

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